An important requirement of the auditing standards is that the auditor gather sufficient appropriate evidence to determine whether the financial statements have been prepared by competen
Trang 1What Is Auditing?
True / False Questions
1 Auditing is the process of reviewing the financial information prepared by the management
6 The Auditing Standards Board was formed in 1978 as an equal organization to the
American Institute of Certified Public Accountants (AICPA)
True False
Trang 27 An important requirement of the auditing standards is that the auditor gather sufficient appropriate evidence to determine whether the financial statements have been prepared by competent individuals
True False
8 An accounting cycle involves both balance sheet and income statement accounts and follows transactions through a process where it begins to its conclusion
True False
9 The auditor structures the evidence process by considering the assertions made by a
consultant in preparing the financial statements of the company
Multiple Choice Questions
12 Which of the following is a characteristic of the person doing the assessment of the financial statements?
A The person completing the assessment is an employee of the company
B The person completing the assessment works for an accounting firm that is associated with the company only in a role of being hired to perform an audit
C The person performing the assessment may be a banker, current or potential stockholder, or
a regulatory body
D The person performing the assessment makes adjustments to the decisions recorded by the firm so that outsiders have accurate information to make decisions
Trang 313 Which of the following is a characteristic of the person doing the assessment of the financial statements?
A The person completing the assessment is not an employee of the company
B The person completing the assessment works for an accounting firm that is associated with the company in a role of being hired to perform an internal audit
C The person performing the assessment may be a banker, current or potential stockholder, or
a regulatory body
D The person performing the assessment makes adjustments to the decisions recorded by the firm so that outsiders have accurate information to make decisions
14 One of the characteristics of a principal-agent relationship is:
A The owners of the company are involved in the daily management of the company
B The owners of the company hire an agent to run the company for them and to make daily decisions for the company
C The owners have more knowledge than management about the daily operations of the company
D Outsiders benefit when a manager is hired by owners to protect their interests in the
company because the information available to outsiders is more likely to correspond to financial accounting standards
15 One of the characteristics of a principal-agent relationship is:
A The owners of the company are involved in the daily management of the company
B The owners of the company hire an auditor to run the company for them and to make daily decisions for the company
C The owners have more knowledge than management about the daily operations of the company
D Outsiders benefit when an auditor is hired by owners to protect their interests in the
company because the information available to outsiders is more likely to correspond to financial accounting standards
Trang 416 One of the characteristics of a principal-agent relationship is:
A The owners of the company are not involved in the daily management of the company
B The owners of the company hire an auditor to run the company for them and to make daily decisions for the company
C The owners have more knowledge than management about the daily operations of the company
D Outsiders benefit when a manager is hired by owners to protect their interests in the company because the information available to outsiders is more likely to correspond to financial accounting standards
17 One of the differences between a corporate form of organization and partnership form is:
A Someone in the corporate form has personal liability
B Corporations can have offices in only one state
C Someone in the partnership form has personal liability
D Partnerships can have offices in only one state
18 Which of the following best describes "attest" services?
A The auditor attests to the quality of some type information
B The auditor attests to the source of some type of information
C The auditor attests to the accuracy of some type of information
D The auditor attests to the quantity of some type of information
19 The areas where management is more likely to misstate transactions are riskier for the auditor because
A the auditor will be the subject of legal action
B the auditor probably will not have enough time to identify these areas
C failing to correct the misstatements may lead to issuing a clean opinion on materially misstated financial statements
D failing to correct the misstatements may lead to issuing a qualified opinion on materially misstated financial statements
Trang 520 Which of the following will allow a company to report higher net income?
A recording fictitious expenses at the beginning of the year
B recording fictitious revenue at the end of the year
C depreciating long lived assets
D increasing a line of credit at a bank
21 The principle reason(s) for public companies to misstate financial statements is to
A minimize the amount of taxes owed by the company
B maximize the amount of dividends paid to shareholders
C satisfy the requirement of a going concern
D keep the company's stock price from falling
22 Growth in revenue is an important factor for many companies The desired outcome in many businesses is for revenue and possibly net income to increase at a rate at least equal to the prior year's increase Which of the following best explains this desire?
A If the company does not meet this level of growth, it is an indication that the company maynot be able to meet the dividend expectations of investors
B Outsiders, particularly stockholders expect this level of growth, and if companies fail to meet these targets, their stock price may drop as investors sell their stock and find other companies who can meet the growth level desired
C Management is concerned that failure to achieve expected levels of growth may result in management not receiving anticipated bonuses
D Management is concerned that if the company does not achieve the expected increase in growth, that the auditors will demand a higher fee and expend greater effort in attempting to find misstatements in the financial statements
23 Which of the following is not an important part of the audit process?
A understanding incentives of the company to misstate the financial statements
B identifying the financial statement accounts with the greatest potential for misstatements
C documenting management's efforts to achieve the necessary requirements to gain a bank loan
D designing audit procedures to determine that the accounts are fairly presented according to the applicable financial reporting framework
Trang 624 Which of the following is an accurate statement about the accounting profession?
A Recent audit failures have increased the public reputation of the accounting profession
B Public scrutiny of the profession prompts auditors to become more careful and efficient in their fundamental tasks
C The value of clear and accurate financial disclosure is less important in the current businessenvironment
D The auditor's responsibility to management to provide financial information consistent with accounting regulations has never been more important
25 Which of the following is not an example of auditors' strong bargaining position with management?
A The high financial and social costs reflect both public interest and business necessity
B The public value of the audit cannot be too highly emphasized
C Audit firms can be use the audit process as a "loss leader."
D The negative impact of failed audits is apparent to observers of the profession, loss of public confidence, and an investors' trust
26 Which of the following is an incorrect statement about auditors' professional duties?
A In their professional duties, they will be watched by federal and state regulators and
interested outsiders
B Attention will be focused on the auditors' responsibility to determine whether the financial statements present fairly the financial position of the firm and the results of operations
C Auditors must understand the importance of presenting unbiased information to outsiders
D The auditor is expected to approach an audit with an independent mind and to recognize that he or she is hired to protect the interests of management
27 The three standard setting organizations that are involved in establishing auditing
C The American Association of Accountants, the Auditing Standards Board, and the
International Auditing and Assurance Standards Board
D The Auditing Standards Board, the International Auditing and Assurance Standards Board,and the Public Company Accounting Oversight Board
Trang 728 The Auditing Standards Board gets its authority to write auditing regulations from
A the misapplication of auditing procedures
B rule 3001 of the PCAOB Code of Professional Conduct
C rule 202 of the AICPA Code of Professional Conduct
D the Securities and Exchange Commission
29 The Preface to the Auditing Standards describes the fundamental principles that govern anaudit According to these principles, the purpose of an audit is
A to provide reasonable assurance that there are no misstatements in the financial statements
B to plan the audit to provide reasonable assurance of detecting fraud
C to ensure that the financial statements are fairly presented
D to increase the level of confidence that outsiders place in the financial statements
30 The audit opinion states whether the financial statements have been prepared in
accordance with an applicable financial reporting framework In other words, the opinion states whether
A the company has followed the accounting standards in supporting the audit
B the audit was conducted in accordance with Generally Accepted Accounting Principles
C the auditing standards required management to prepare the financial statements and to maintain a system of internal controls relevant to the financial statements
D the audit committee provided the auditor with all the information relevant to the
preparation of the financial statements and unrestricted access to those in the company from whom the auditor may need additional evidence
31 Throughout the planning and performance of the audit, auditors are responsible for
A having appropriate competence and capabilities to review the audit
B complying with relevant ethical requirements
C complying with relevant independence and fraud detection requirements
D maintaining professional appearance and exercising professional questioning
Trang 832 Throughout the planning and performance of the audit, auditors are responsible for
A having appropriate competence and capabilities to perform the audit
B complying with client ethical requirements
C complying with relevant independence and fraud detection requirements
D maintaining professional appearance and exercising professional questioning
33 Throughout the planning and performance of the audit, auditors are responsible for
A having appropriate competence and capabilities to review the audit
B complying with client ethical requirements
C complying with relevant independence and due care requirements
D maintaining professional appearance and exercising professional questioning
34 Throughout the planning and performance of the audit, auditors are responsible for
A having appropriate competence and capabilities to review the audit
B complying with client ethical requirements
C complying with relevant independence and fraud detection requirements
D maintaining professional skepticism and exercising professional judgment
35 To obtain reasonable assurance, which is a high, but not absolute level of assurance, the auditor:
A performs the work and properly supervises the client
B assumes appropriate materiality level or levels
C identifies and assesses risks of material misstatement, whether due to fraud or error, based
on an understanding of the entity and its environment, including the entity's internal control
D obtains sufficient appropriate management representations about whether material
misstatements exist
Trang 936 To obtain reasonable assurance, which is a high, but not absolute level of assurance, the auditor:
A plans the work and properly supervises any assistants
B assumes appropriate materiality level or levels
C identifies and assesses risks of fraud based on an understanding of the entity and its environment, including the entity's internal control
D obtains sufficient appropriate management representations about whether material
misstatements exist
37 To obtain reasonable assurance, which is a high, but not absolute level of assurance, the auditor:
A performs the work and properly supervises the client
B determines appropriate materiality level or levels
C identifies and assesses risks of due to fraud based on an understanding of the entity and its environment, including the entity's internal control
D obtains sufficient appropriate management representations about whether material
misstatements exist
38 To obtain reasonable assurance, which is a high, but not absolute level of assurance, the auditor:
A performs the work and properly supervises the client
B assumes appropriate materiality level or levels
C identifies and assesses risks of fraud based on an understanding of the entity and its environment, including the entity's internal control
D obtains sufficient appropriate audit evidence about whether material misstatements exist
39 The auditor is unable to obtain absolute assurance that the financial statements are free from material misstatement because of inherent limitations, which arise from
A the nature of financial reporting
B the selection of audit procedures
C the client's requirement for the audit to be conducted within a reasonable period of time and at a reasonable cost
D the fact that there is no such thing as absolute assurance
Trang 1040 The auditor is unable to obtain absolute assurance that the financial statements are free from material misstatement because of inherent limitations, which arise from
A the structure of financial reporting
B the nature of audit procedures
C the client's requirement for the audit to be conducted within a reasonable period of time and at a reasonable cost
D the fact that there is no such thing as absolute assurance
41 The auditor is unable to obtain absolute assurance that the financial statements are free from material misstatement because of inherent limitations, which arise from
A the structure of financial reporting
B the selection of audit procedures
C the need for the audit to be conducted within a reasonable period of time and at a
reasonable cost
D the fact that there is no such thing as absolute assurance
42 The Auditing Standards Board
A each year issues a new "Codification of Statements of Auditing Standards"
B issues new financial accounting standards
C evaluates complaints about violations of the standards
D issues new auditing standards as "Statements on Auditing Standards"
43 A practicing auditor uses the material contained in the auditing standards to determine all but which of the following?
A the procedures performed
B the risk assessed
C the evidence gathered
D the audit report issued
44 The Public Companies Accounting Oversight Board (PCAOB) is
A a for profit public company
B a government entity
C private sector non profit organization
D a non profit public company
Trang 1145 The Securities Exchange Commission (SEC) has oversight authority over the PCAOB
Which of the following is not within the SEC's oversight authority?
A The SEC approves the PCAOB's rules
B The members of the PCAOB are appointed by the SEC
C The SEC approves the PCAOB's budget
D The SEC determines which audit firms will be inspected by the PCAOB
46 Before the creation of the PCAOB, the auditing standards of the Auditing Standards Board were used to audit all companies Which statement best describes the PCAOB and auditing standards?
A In 2003, the PCAOB adopted certain auditing standards of the ASB as interim standards
B In 2003, the PCAOB developed over 100 new auditing standards
C In 2003, the PCAOB developed audit standards to audit all companies, private and public
D In 2003, the PCAOB adopted all the standards of the AICPA to save time in the
development of new standards
47 Which of the following is correct about the PCAOB?
A The PCAOB receives its authority from the SEC
B Auditing standards issued by the PCAOB must be approved by the U.S Congress
C The PCAOB requires companies with stock listed on a U.S stock exchange to have an integrated audit by an auditor registered with the PCAOB
D All audit firms performing audits of public companies are registered with and agree to comply with the auditing procedures established by the PCAOB
48 Which of the following is correct about the PCAOB?
A The PCAOB receives its authority from U.S Federal Law
B Auditing standards issued by the PCAOB must be approved by the U.S Congress
C Anyone who wants to purchase stock on a U.S stock exchange must follow the rules of theSEC
D All audit firms performing audits of public companies are registered with and agree to comply with the auditing procedures established by the PCAOB
Trang 1249 Which of the following is correct about the PCAOB?
A The PCAOB receives its authority from the SEC
B Auditing standards issued by the PCAOB must be approved by the SEC
C Anyone who wants to purchase stock on a U.S stock exchange must follow the rules of theSEC
D All audit firms performing audits of public companies are registered with and agree to comply with the auditing procedures established by the PCAOB
50 Which of the following is correct about the PCAOB?
A The PCAOB receives its authority from the SEC
B Auditing standards issued by the PCAOB must be approved by the U.S Congress
C Anyone who wants to purchase stock on a U.S stock exchange must follow the rules of theSEC
D All audit firms performing audits of public companies are registered with and agree to comply with the auditing standards established by the PCAOB
51 The PCAOB is required to
A conduct continuing inspections of public accounting firms registered with the SEC
B inspect firms with more than 1000 public clients on an annual basis
C inspect firms with fewer than 1000 clients at least every three years
D post the inspection reports on the website for the PCAOB and are available to the public
52 The PCAOB is required to
A conduct continuing inspections of public accounting firms registered with the PCAOB
B inspect firms with more than 1000 public clients on an annual basis
C inspect firms with fewer than 1000 clients at least every three years
D post the inspection reports on the SEC website and are available to the public
53 The PCAOB is required to
A conduct continuing inspections of public accounting firms registered with the SEC
B inspect firms with more than 100 public clients on an annual basis
C inspect firms with fewer than 100 clients at least every four years
D post the inspection reports on the SEC website and are available to the public
Trang 1354 The PCAOB is required to
A conduct continuing inspections of public accounting firms registered with the SEC
B inspect firms with more than 100 public clients on a semi-annual basis
C inspect firms with fewer than 100 clients at least every three years
D post the inspection reports on the SEC website and are available to the public
55 The International Auditing and Assurance Standards Board
A is the standard-setting board for the International Federation of Accountants
B is a committee of the AICPA
C reports directly to the SEC
D adjusts international standards to U.S GAAP
56 An important requirement of the auditing standards is that the auditor
A have no contact with the audit committee of the board of directors
B use the work of the internal audit staff
C assist management in the preparation of the financial statements
D gather sufficient appropriate evidence
57 Which of the following would not be considered audit evidence?
A the information in the accounting notes
B the records of initial entries
C supporting documents
D general and subsidiary ledgers of the company
58 Which of the following would not be considered audit evidence?
A the information in the accounting records
B the estimates of initial entries
C supporting documents
D general and subsidiary ledgers of the company
Trang 1459 Which of the following would not be considered audit evidence?
A the information in the accounting records
B the records of initial entries
C supporting explanations
D general and subsidiary ledgers of the company
60 Which of the following would not be considered audit evidence?
A the information in the accounting records
B the records of initial entries
C supporting documents
D general and subsidiary worksheets of the company
61 Management is responsible for
A gathering sufficient evidence
B the preparation of the financial statements
C determining that the financial statements have been prepared in accordance with the applicable financial reporting framework
D approving the audit plan
62 The auditor is responsible for
A the preparation of the financial statements
B preparing adjustments to the accounting records
C gathering sufficient appropriate evidence
D advising management on accounting matters
63 Which of the following is not a type of evidence gathered by the auditor?
Trang 1564 Substantive tests of transactions are done to gather evidence on
A income statement accounts
B balance sheet accounts
C accounts receivable
D inventory
65 Substantive tests of balances are performed to gather evidence on
A income statement accounts
B balance sheet accounts
C depreciation expense
D salaries expense
66 Substantive tests answer the question
A Do the financial statement accounts present fairly the financial condition of the firm?
B Is the amount stated in the account accurate?
C Are all transactions included in the account?
D Are all transactions in the account in the proper period?
67 If the financial statements do not present fairly the financial condition of the firm in accordance with applicable financial reporting framework, the auditor should
A calculate the correct number and make an adjustment to the financial statements
B advise management of the discrepancy and stop auditing until the discrepancy is corrected
C gather sufficient evidence to arrive at the correct financial statement number
D review the risk assessment and make any necessary revisions
68 Tests done by the auditor that are referred to as internal control tests determine whether
A the financial statements are materially misstated
B the balance sheet is materially misstated
C the internal controls are the responsibility of management
D the internal controls of the company prevent or detect misstatements in the financial statements
Trang 1669 If the controls are not working, the auditor is most likely to
A request the client to make the necessary adjustment
B perform a substitute test
C perform more substantive tests
D perform more tests of controls
70 Which of the following statements describe an analytical procedure?
A Analytical procedures are a form of evidence gathered by the auditor
B Analytical procedures are calculations of financial amounts
C Analytical procedures are a comparison of last year's unaudited financial statements with the current year's audited statements
D Analytical procedures are a form of internal control audit procedure
71 Which of the following statements describe an analytical procedure?
A Analytical procedures are a form of evidence gathered by the client
B Analytical procedures are calculations of financial ratios
C Analytical procedures are a comparison of last year's unaudited financial statements with the current year's audited statements
D Analytical procedures are a form of internal control audit procedure
72 Which of the following statements describe an analytical procedure?
A Analytical procedures are a form of evidence gathered by the client
B Analytical procedures are calculations of financial amounts
C Analytical procedures are a comparison of last year's audited financial statements with the current year's unaudited statements
D Analytical procedures are a form of internal control audit procedure
73 Which of the following statements is an analytical procedure?
A Analytical procedures are a form of evidence gathered by the client
B Analytical procedures are calculations of financial amounts
C Analytical procedures are a comparison of last year's unaudited financial statements with the current year's audited statements
D Analytical procedures are a form of substantive audit procedure
Trang 1774 Substantive tests of transactions are typically done on transactions
A for the entire year for a financial statement audit
B at the end of the year for a Sarbanes-Oxley financial statement audit
C at the end of the year for a Sarbanes-Oxley financial reporting process
D of balances for the entire year
75 Substantive tests of balances are typically done on transactions
A for the entire year for a financial statement audit
B at the end of the year for a Sarbanes-Oxley financial statement audit
C at the end of the year for a Sarbanes-Oxley financial reporting process
D of balances on the year-end balance only
76 Tests of controls are typically done on transactions
A for the entire year for an audit of the financial reporting process
B at the end of the year for a Sarbanes-Oxley financial statement audit
C at the end of the year for a Sarbanes-Oxley financial reporting process
D of balances on the year-end balance only
77 Tests of controls for non public companies are typically done on transactions
A for the entire year for a financial statement audit
B at the end of the year for a Sarbanes-Oxley financial statement audit
C at the end of the year for a Sarbanes-Oxley financial reporting process
D of balances on the year-end balance only
78 In the gathering of evidence, several concepts are important At the beginning of the audit,the auditor presents his credentials to the client as
A an individual with training and knowledge in accounting and auditing
B an individual who will be sensitive to good client relations
C someone with the knowledge to make good business decisions
D someone who will exercise good judgment
Trang 1879 The auditor must gather evidence guided by the standard of due professional care Due professional care requires the auditor
A to perform audit duties with skill comparable to that of any other auditor
B to gather statements and interpret statements in a manner that any other professional wouldhave done
C to know accounting and auditing requirements
D to be knowledgeable about the economy
80 The auditor must gather evidence guided by the standard of due professional care Due professional care requires
A the auditor to perform audit duties with skill comparable to that of any other client
B to gather evidence and interpret evidence in a manner that any other auditor would have done
C the auditor to know accounting and auditing requirements
D the auditor to be knowledgeable about the economy
81 The auditor must gather evidence guided by the standard of due professional care Due professional care requires
A the auditor to perform audit duties with skill comparable to that of any other client
B to gather statements and interpret statements in a manner that any other professional wouldhave done
C the auditor to know accounting and auditing standards
D the auditor to be knowledgeable about the economy
82 The auditor must gather evidence guided by the standard of due professional care Due professional care requires
A the auditor to perform audit duties with skill comparable to that of any other client
B to gather statements and interpret statements in a manner that any other professional wouldhave done
C the auditor to know accounting and auditing requirements
D the auditor to be knowledgeable about the client
Trang 1983 Professional skepticism is closely linked to due professional care For an auditor to gather evidence with due professional care, he or she must perform the audit with an attitude of professional skepticism Which of the following best describes professional skepticism?
A an attitude of professional skepticism is present when the auditor maintains a questioning mind and makes a critical assessment of the interviews gathered
B professional skepticism is used in the planning stage to determine the evidence to be gathered and the interpretation of the evidence
C if the auditor applies the concept of professional skepticism, he should be able to obtain assurance that the financial statements are free from material misstatements
D professional skepticism neither assumes that the client is dishonest nor that the client is honest
84 Professional skepticism is closely linked to due professional care For an auditor to gather evidence with due professional care, he or she must perform the audit with an attitude of professional skepticism Which of the following best describes professional skepticism?
A an attitude of professional skepticism is present when the auditor maintains a questioning mind and makes a critical assessment of the interviews gathered
B professional skepticism is used in the planning stage to determine the evidence to be gathered and the interpretation of the evidence
C if the auditor applies the concept of professional skepticism, he should be able to obtain reasonable assurance that the financial statements are free from material misstatements
D professional skepticism assumes that the client is dishonest
85 Professional skepticism is closely linked to due professional care For an auditor to gather evidence with due professional care, he or she must perform the audit with an attitude of professional skepticism Which of the following best describes professional skepticism?
A an attitude of professional skepticism is present when the auditor maintains a questioning mind and makes a critical assessment of the interviews gathered
B professional skepticism is used throughout the audit to determine the evidence to be gathered and the interpretation of the evidence
C if the auditor applies the concept of professional skepticism, he should be able to obtain assurance that the financial statements are free from material misstatements
D professional skepticism assumes that the client is dishonest
Trang 2086 Professional skepticism is closely linked to due professional care For an auditor to gather evidence with due professional care, he or she must perform the audit with an attitude of professional skepticism Which of the following best describes professional skepticism?
A an attitude of professional skepticism is present when the auditor maintains a questioning mind and makes a critical assessment of the evidence gathered
B professional skepticism is used in the planning stage determine the evidence to be gatheredand the interpretation of the evidence
C if the auditor applies the concept of professional skepticism, he should be able to obtain assurance that the financial statements are free from material misstatements
D professional skepticism assumes that the client is dishonest
87 The revenue business process would include procedures for
A initiating a sale
B storing the goods
C invoicing the vendor
D making payment for the sale
88 The revenue business process would include procedures for
A initiating a proposal
B shipping the goods or providing a service
C invoicing the vendor
D making payment for the sale
89 The revenue business process would include procedures for
A initiating a proposal
B storing the goods
C invoicing the customer
D making payment for the sale
90 The revenue business process would include procedures for
A initiating a proposal
B storing the goods
C invoicing the vendor
D collecting payment for the sale
Trang 2191 The business process of selling a product considers evidence related to the transactions involving revenue and accounts receivable, including doubtful accounts and bad debt expense.
We use the concept of business processes to structure the way we gather evidence Which of the following would not be considered a business process?
A advertising a product and collecting cash
B borrowing money to operate in a business
C producing inventory to sell
D buying fixed assets to use in the business
92 When management presents the financial statements to the auditor, management makes several assertions about the financial statements Which of the following is not one of these assertions?
A existence or occurrence
B valuation and allocation
C accuracy
D categorization
Trang 2295 When management presents the financial statements to the auditor, management makes several assertions about the financial statements Which of the following is not one of these assertions?
A existence or occurrence
B valuation and allocation
C mathematically correct
D classification
96 The audit report is addressed to
A the management of the company
B the partner in charge of the audit
C the stockholders and the board of directors
D the SEC, AICPA, and the PCAOB
97 Which of the following is considered a regulatory body of the accounting profession?
A the New Jersey Society of CPAs
B the New Jersey State Division of Consumer Affairs
C the Financial Accounting Standards Board
D the Government Accountability Office
Trang 23Chapter 01 What Is Auditing? Answer Key
True / False Questions
1 Auditing is the process of reviewing the financial information prepared by the management
Trang 244 For public companies, management typically prefers lower net income
6 The Auditing Standards Board was formed in 1978 as an equal organization to the
American Institute of Certified Public Accountants (AICPA)
Trang 258 An accounting cycle involves both balance sheet and income statement accounts and follows transactions through a process where it begins to its conclusion
Trang 26Multiple Choice Questions
12 Which of the following is a characteristic of the person doing the assessment of the financial statements?
A The person completing the assessment is an employee of the company
B The person completing the assessment works for an accounting firm that is associated with
the company only in a role of being hired to perform an audit
C The person performing the assessment may be a banker, current or potential stockholder, or
a regulatory body
D The person performing the assessment makes adjustments to the decisions recorded by the firm so that outsiders have accurate information to make decisions
AACSB: Communications
AICPA BB: Critical Thinking
AICPA FN: Risk Analysis
Bloom's: Understand
Difficulty: Easy
13 Which of the following is a characteristic of the person doing the assessment of the financial statements?
A The person completing the assessment is not an employee of the company
B The person completing the assessment works for an accounting firm that is associated with
the company in a role of being hired to perform an internal audit
C The person performing the assessment may be a banker, current or potential stockholder, or
a regulatory body
D The person performing the assessment makes adjustments to the decisions recorded by the firm so that outsiders have accurate information to make decisions
AACSB: Communications
AICPA BB: Critical Thinking
AICPA FN: Risk Analysis
Bloom's: Understand
Difficulty: Easy
Trang 2714 One of the characteristics of a principal-agent relationship is:
A The owners of the company are involved in the daily management of the company
B The owners of the company hire an agent to run the company for them and to make daily
decisions for the company
C The owners have more knowledge than management about the daily operations of the company
D Outsiders benefit when a manager is hired by owners to protect their interests in the company because the information available to outsiders is more likely to correspond to financial accounting standards
15 One of the characteristics of a principal-agent relationship is:
A The owners of the company are involved in the daily management of the company
B The owners of the company hire an auditor to run the company for them and to make daily decisions for the company
C The owners have more knowledge than management about the daily operations of the company
D Outsiders benefit when an auditor is hired by owners to protect their interests in the
company because the information available to outsiders is more likely to correspond to financial accounting standards
Trang 2816 One of the characteristics of a principal-agent relationship is:
A The owners of the company are not involved in the daily management of the company.
B The owners of the company hire an auditor to run the company for them and to make daily decisions for the company
C The owners have more knowledge than management about the daily operations of the company
D Outsiders benefit when a manager is hired by owners to protect their interests in the company because the information available to outsiders is more likely to correspond to financial accounting standards
17 One of the differences between a corporate form of organization and partnership form is:
A Someone in the corporate form has personal liability
B Corporations can have offices in only one state
C Someone in the partnership form has personal liability.
D Partnerships can have offices in only one state
18 Which of the following best describes "attest" services?
A The auditor attests to the quality of some type information
B The auditor attests to the source of some type of information
C The auditor attests to the accuracy of some type of information.
D The auditor attests to the quantity of some type of information